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Farm Book-keeping 



A PRACTICAL BOOK 
OF INSTRUCTION 
WRITTEN PARTICU- 
LARLY FOR USE ON 
THE FARM 




By H. GRANT LAMB 



1908 

The Thomas Press 
New York 



^5 






LI6RARY of GeN(iRE6S 

SEP 26 ]i*ua 
<?o pt a. * 



Copyright 1908, by 

H. Grant Lamb. 
All rights reserved. 



INTRODUCTION, 



In getting up this book I have at all times kept 
foremost in mind that it is intended for farmers and 
their wives. That the instruction must be clear and 
simple, and the method such that the results will 
show the farmer what he wants to know. 

The advantages derived from keeping books are 
manifold, and no doubt a book of some sort is kept 
by every careful person, whether a farmer or not. 
It is one thing, however, to keep a rough memo- 
randum of expenditures and another to keep a scien- 
tific record, a record which shows at all times the 
amount being made, spent, saved. "7:. " 

The Farm Book-Keeper will admirably^ serve 
the man that wants to do things right. The instruc- 
tion is so arranged and so simple that you will have 
no difficulty, and can with confidence sit down and 
record immediately by Double Entry Book-keeping, 
all cash received and paid out, all produce grown 
and sold, and bring the business of a month or of a 
year to the final point where the exact profit or loss 
is shown. While the method is simple, the results 
are the same as those obtained by the largest mer- 
cantile establishments. 

In endeavoring to make Double Entry Book- 
keeping perfectly clear and simple, it has been found 



iv Introduction. 

desirable to eliminate practically all side issues and 
elaborate definitions, and to keep closely to the main 
point of teaching how to keep one's own books. 
Most text books are so overburdened with side issues 
that it is next to impossible for anyone not an expert 
to understand them or to find the real kernel. 

With the foregoing I commend this little book to 
your favor, feeling confident it will be found all 
that is claimed, and that the hour or two a week you 
may spend at Double Entry Book-keeping will be 
filled with a just measure of profit and pleasure. 

Matawan, N. J. H. G. L. 



CONTENTS. 



J f . Page. 

Introduction j-j 

Contents y 

Foreword of Instruction vii 

Chapter I. 
Inventory of Resources and Liabilities 1 

Chapter II. 
Opening the Journal 3 

Chapter III. 
Opening the Ledger 4 

Chapter IV. 
Posting 5 

Chapter V. 
Explanation of the Ledger Accounts 9 

Chapter VI. 
Daily Transactions 1 5 

Chapter VII. 
The Growing A/C | 7 

Chapter VIII. 
Monthly Closing 21 



V. 



vi Contents. 

Chapter IX. 

Inventory Diagram 28 

Journal ** 30 

Ledger Index ** 38 

Ledger - ** 39 

Trial Balance ** 48 

Chapter X. 
After the First Month 49 

Chapter XI. 
Definitions and Meanings 51 

Chapter XII. 
Index 60 



FOREWORD OF INSTRUCTION, 



You will note that the detailed instructions in this 
book are all in one part, while the illustrating Dia- 
grams are grouped together in another part. The 
object of keeping all the Diagrams together is to 
enable an entry or transaction being traced, without 
looking in various parts of the book. 

Look over and study the Diagrams carefully. 
The great majority of people learn much more 
readily from a practical illustration than from written 
directions, no matter how clear the directions n)ay be. 
Before starting your books it would be well to read 
this book through, following the written directions by 
reference to the Diagrams. This will familiarize 
you with the method and the objects to be attained. 
Once you start at your own books, however, follow 
the instructions in exact sequence and finish each 
process before proceeding to the next. 

The opening of the books will be found the only 
laborious part. Be very careful in taking the Inven- 
tory to get it correct, or it may later on cause diffi- 
culties. 

During the first month or so, refer to the specimen 
entries in the Diagrams when you are entering your 
daily transactions. By this means you will avoid 
getting entries down the wrong way, and will also 



viii Foreword of Instruction. 

get imbued much more quickly with the principles^ 
of Double Entry Book-keeping. 

Keep your books in a neat condition, and always 
make plain and legible figures; it saves time and 
takes no more effort. 

Remember these CARDINAL RuLES: 

I. The same amount or total amount must al- 
ways be placed on the Debit and Credit 
sides. 

II. Debit that which CoSTS, that which RE- 
CEIVES, that which You Pay. 

III. Credit that which GiVES, that which PRO- 

DUCES, that which PaYS You. 

IV. Post from the Debit side of the Journal to the 

Debit side of the Ledger, and from the 
Credit side of the Journal to the Credit 
side of the Ledger. 

V. Make all Journal entries and postings in black 
ink; and all Ledger transfer entries in 
red ink. 

Be systematic, enter the daily transactions in the 
Journal promptly, post to the Ledger regularly and 
close the books at the end of the month punctually. 
Have the monthly Trial Balance balance, and start 
out each new month with the preceding month's busi- 
ness closed in apple pie order. 



CHAPTER I. 



INVENTORY OF RESOURCES AND 
LIABILITIES. 



( I ) In starting a set of double entry books the 
first thing is to find out what you own and what you 
owe, or in other words, your Resources and Lia- 
bihties. 

(2) To obtain this information accurately, 
make a complete list or inventory of what you own, 
excepting household furniture and personal effects. 
The inventory will consist of all or some of the items 
shown under Resources in the Inventory Diagram 
(95) . If you have any classes of property not men- 
tioned in this diagram, put them down. Should you 
have more than one bank account enter them sep- 
arately. 

(3) Opposite each item mark its value, or as 
near as you can estimate it, and after the manner 
shown in the diagram (95), group the values of 
those items coming under a general classification. 
That is, Oats, Corn and other produce should be 
added together, and the various items of Live Stock 
should be added together. 



2 Inventory of Resources and Liabilities. 

(4) Then add all the items and the total will 
he your Resources. 

(5) After you have made a list of, and totalled 
the amount of your Resources, make a similar list 
of what you owe, called your Liabilities. This will 
consist of all or some of the items shown under Lia- 
bilities in the Inventory Diagram (95). Should you 
have any classes of liabilities not shown there, put 
them down. 

(6) Mark the amount opposite each item and 
total as shown in the diagram. 

(7) Deduct the Liabilities from the Resources, 
and the difference will represent your Net Worth. 

(8) Copy the lists of Resources and Liabilities 
on the last few pages of the Journal. By having this 
information right in the Journal it is always at hand. 
You can tell from the number of lines it will require 
in the Journal just how many pages to use. 



CHAPTER II. 



OPENING THE JOURNAL. 



(9) Turn to the first page in the Journal and 
on the top line write the date you start keeping the 
books. 

( 1 0) Then write the list of your Resources by 
classes only, and on the left side or Debit column 
enter the amounts. See Journal Diagram (96) . 

(11) Now write the list of Liabilities items in 
the same manner, entering the amounts on the right 
side or Credit column, as shown in the Journal Dia- 
gram. 

(12) Lastly enter the Net Worth, under the 
title of Owner's Capital A/C, on the Credit side, 
being careful after making all the entries that the 
totals of the Debit side and of the Credit side are 
the same. 

(13) It is an absolute rule with the Journal that 
the two sides must always have the same totals. 
When an amount is put on one side of the Journal 
an equal amount must be entered on the other side 
or the books will not balance. 



CHAPTER III. 



OPENING THE LEDGER. 



(14) The Ledger is a book to which is briefly 
transferred or Posted, the items first written in the 
Journal. In the Journal we write continuously, but 
the Ledger is divided into Accounts. 

(15) The index in front of the Ledger is to 
enable the convenient locating of any account in the 
Ledger. 

(16) You will now open the Ledger by writing 
in the names of the principal accounts. Write only 
the names of the accounts at this time. 

(17) On page 1 of the Ledger write : Owner's 
Capital A/C. 

See the Ledger Diagram (98) for this and the 
following title entries. 

(18) On page 2 write: Cash, 

(19) On page I 7 write : Bank A/C. 

(20) On page 27 write: Farm Expense. 
(21 ) On page 37 write: House Expense. 

(22) On page 47 write: Family Expense. 

(23) On page 57 write: Growing A/C. 



Opening the Ledger. 5 

(24) On page 61 write: Produce. 

(25) On page 66 write: Live StocI^. 

(26) On page 69 write: Butter and Eggs. 

This account should only be opened if you 
^ell butter and eggs. 

(27) On page 71 write: Interest and Divi- 
dends. 

(28) On page 72 write: Taxes and Insurance. 

(29) On page 73 write: Farm Property. 

(30) On page 74 write : Implements. 

(3 1 ) On page 75 write : Loss and Gain. 

(32) Other acocunts may be opened whenever 
necessary, but the ones given here are needed for 
nearly all sets of farm books. 

(33) The reason several pages are given to 
some accounts and only one to others, is because some 
accounts, like Cash, will be used constantly while 
others will be used very little. In opening a new 
account always estimate beforehand the number of 
pages it will probably require. 

(34) Now index each account under its initial 
letter, as: F — Farm Expense .... 27 

Family Expense ... 47 
Farm Property^ .... 73 
Index all new accounts at the time of opening 
them. See Ledger Index Diagram (97). 



CHAPTER IV. 

POSTING. 



(35) With the names of the more important 
accounts written in the Ledger and indexed, the next 
procedure is to Post from the Journal to the Ledger. 

(36) Posting is the transferring of entries from 
the Journal to the Ledger. It is usual when opening 
a new account to make a posting to it at once, but 
owing to the number of new accounts incident to 
opening a new set of books, we have written the 
names of several accounts first and will now post to 
them. 

(37) Turning to the Journal (see 96), we find 
the first item is "Cash, $32.47," on the Debit side. 

Note. — On your own Journal the amount will he 
different. You must of course hear in mind that the 
diagrams in this hool^ are onl'^ intended for purposes 
of illustration, and that it is the real entries and 
amounts in your own hooJ^s that are to he posted, etc. 

(38) Looking in the Ledger Index you will find 
Cash is on page 2. Mark this page number in the 
small column in the Journal, just before and on the 
same line with Cash. See the way it is done in the 



Posting. 7 

Journal Diagram (96) and then mark the Ledger 
page number before all the accounts, as shown. 

(39) Now turn to page 2, in the Ledger, and 
as shown in the Ledger Diagram (98) ; post this 
item on the Debit side of Cash A/C. : 

JP 
Oct. I — Sundries i 32.47 

Place a small V in the Journal check column to 
show the item has been posted. 

Sundries is a word used in book-keeping to in- 
dicate that several accounts are involved. 

Note. — The column marked JP is for the Jour- 
nal page number from rvhich the entry is posted. 

(40) Post the Bank A/C entry in the same 
way and as shown in the Ledger Diagram. Always 
remember to place the V in the check column imme- 
diately after posting. 

(41 ) After posting the other items on the Debit ' 
side you will come to STOCKS AND BoNDS. No 
Ledger account having been opened under this title 
it is necessary to open one. Therefore, on page 76 
write: Stocks and Bonds. 

Index this account. 

Mark the Ledger page number in the Journal. 
Post the items from the Journal to the Ledger as 
you did the others. 

Note. — This is the method of opening all new 
accounts in the Ledger. Should there he new ac- 



8 Posting. 

counts to open in your own books, do it this wa^y be- 
ing verp careful to alvpays enter the account in the 
Index. 

(42) Next post the items from the Credit side 
of the Journal to the Credit side of the Ledger. 

(43) Always post from the Debit side of the 
Journal to the Debit side of the Ledger, and from 
the Credit side of the Journal to the Credit side of 
the Ledger. The total amount posted on the Debit 
side must always be the same as on the Credit side. 

(44) Two Ledger accounts are never opened 
for the same thing. There can be only one Cash 
A/C, and the same with the other accounts. For 
exceptions to this rule see (76). 



CHAPTER V. 

EXPLANATION OF THE LEDGER 
ACCOUNTS. 



(45) The object of dividing the Ledger into 
accounts is to enable the gathering together of all 
items of a class, and segregating them from the 
others. Thus in Cash A/C is gathered all cash 
items; in HousE EXPENSE A/C all items relating 
to expenditures for the house. 

Owner's Capital A/C. 

(46) This account shows the Net Worth of 
the owner or of the farm. No entries should be 
made to it after the Opening Entr^ excepting trans- 
fers from the Loss and Gain A/C. The excess 
balance on the Credit side shows the Net Worth. 

Cash A/C. 

(47) To this account are posted all cash items 
received or expended. The excess balance on the 
Debit side shows the amount of cash on hand. 

Bank A/C. 

(48) To this account are posted all deposits 
and withdrawals by cheque or otherwise. The ex- 



1 Explanation of Ledger Accounts. 

cess balance on the Debit side shows the amount on 
deposit. 

Farm Expense A/C. 

(49) To this account are posted all expenses of 
the farm, such as labor, fertilizer, grinding, repairs 
and the like. The excess balance on the Debit side 
shows the amount expended. This account is closed 
into Loss AND Gain A/C monthly. 

House Expense A/C. 

(50) To this account are posted all house ex- 
penses like food, fuel, light, telephone, furniture, etc. 
The excess balance on the Debit side shows the 
amount expended. This account is closed into Loss 
AND Gain A/C monthly. 

Family Expense A/C. 

(51 ) To this account are posted all family ex- 
penses, like clothes, church, newspapers, amusements 
and all expenditures of a personal or family nature. 
The excess balance on the Debit side shows the 
amount expended. This account is closed into Loss 
AND Gain A/C monthly. 

Growing A/C. 

(52) To this account are posted all items affect- 
ing the harvesting of produce, and the growth of 



Explanation of Ledger Accounts. 1 1 

farm animals. The excess balance on the Credit 
side shows profit, while an excess balance on the 
Debit side shows a loss. This account is of such 
importance that Chapter VII has been entirely de- 
voted to it. This account is closed into LpSS AND 
Gain A/C monthly. 

Produce A/C. 

(53) This account shows the value of the grain, 
vegetables and the like being held for future sale. It 
should be Debited when produce is stored after be- 
ing gathered, and not sold at once. When produce 
which has been held for future sale is sold this ac- 
count should be Credited. The excess balance on 
the Debit side shows the value of the produce on 
hand. 

Live Stock A/C. 

(54) This account shows the value of the live 
stock grown and still on hand. It should be Debited 
when any live stock has become ready for sale, and 
is not sold at once. When live stock which is being 
held for sale is sold this account should be Credited. 
The excess balance on the Debit side shows the 
value of the live stock on hand. 

Butter and Eggs A/C. 

(55) To this account are posted all items re- 
lating to the sale of butter and eggs. The excess 



1 2 Explanation of Ledger Accounts. 

balance on the Credit side shows the gross profit. 
This account is closed into Loss AND Gain A/C 
monthly. 

Interest and Dividend A/C. 

(56) To this account are posted all payments 
and receipts of these items. An excess balance on 
the Credit side shows a profit; on the Debit side it 
shows a loss. This account is closed into Loss AND 
Gain A/C monthly. 

Taxes and Insurance A/C. 

(57) To this account are posted all payments 
for these items. The excess balance on the Debit 
side shows the amount paid out. This account is 
closed into Loss and Gain A/C monthly. 

Farm Property A/C. 

(58) To this account a first entry is made show- 
ing the Inventory value. The only other entries 
would be in the event some of the property is sold, 
deteriorates, or more is purchased. The excess bal- 
ance on the Debit side shows the value. 

Loss AND Gain A/C. 

(59) No postings are made to this account, but 
the balances of those accounts showing losses, ex- 
penses or gains are transferred to it. After these 
transfers are made the Loss AND Gain A/C shows 



Explanation of Ledger Accounts. 13 

the profit or loss for the month. A balance on the 
Debit side indicates a loss, and on the Credit side 
a gain. This account is closed into OwNER*S CAP- 
ITAL A/C monthly. 

Implements A/C. 

(60) To this account a first entry is made show- 
ing the Inventory value of all tools and machinery 
on hand. It is Debited when these articles are pur- 
chased, and Credited when they wear out. The 
excess balance on the Debit side shows the value. 

Stocks and Bonds A/C. 

(61 ) A first entry is made showing the Inven- 
tory value. It is Debited when stocks or bonds are 
purchased, and Credited when they are sold. The 
excess balance on the Debit side shows the value. 

Mortgage Payable A/C. 
Notes Payable A/C. 

(62) A first entry is made to each of these ac- 
counts showing the amounts, if any, of the mortgages 
or notes we must pay. The accounts are Credited 
when new notes or mortgages are given, and Debited 
when they are paid. The excess balance on the 
Credit side shows the amount to be paid. Mortgages 
and Notes Receivable are the reverse of Payable. 



1 4 Explanation of Ledger Accounts. 

Personal Accounts. 
(63) Accounts like James Trevor and Gar- 
wood Milling Co. are called Personal Accounts. 
They are Debited with whatever we pay them, and 
are Credited with what they pay us. An excess bal- 
ance on the Debit side shows the amount they owe 
us, and on the Credit side the amount we owe them. 



CHAPTER VI. 



DAILY TRANSACTIONS. 



(64) The most onerous part of the work is now 
over with the books properly opened. The next step 
is to record what has been purchased, sold, paid out, 
grown and the like, or in other words to keep track 
of what is being done. 

(65) In the Journal Diagram (96) after the 
opening entries you will find : 

Paid cash for house suppUes. 

House Expense Dr. 8.20 

Cash Cr. 8.20 

Beginning with this one is a series of specimen en- 
tries intended to cover practically every ordinary 
transaction on a farm. By reference to this diagram 
you should have no difficulty in making a simple 
entry of a purchase for the house, or even the more 
difficult ones covering the payment of Notes, the 
buying and selling of goods on credit, etc. 

(66) Following the practice of the best business 
houses, every useless form has been eliminated and 
the entries put on a common sense basis, making them 
clear and understandable. 

IS 



16 Daily Transactions. 

(67) The proper way is to write down every 
transaction as it occurs. If you pay out money, 
mark it down in the Journal at once. First state 
what it was paid out for, and then to which account 
it should be charged. If for a new hat it is F amily 
Expense; if for food, it is House Expense. Then 
mark down the account that should be credited. If 
you paid cash, credit Cash A/C; if bought on 
credit, credit the person or concern trusting you. 

(68) Once each week is generally a convenient 
and suitable time to post from the Journal to the 
Ledger. Regularity is the one great point, however, 
and whether you post every day, every week or every 
two weeks, you should be punctual and do it at the 
specified time. 

(69) Posting the daily transactions is identical 
with the other posting, so no further instruction along 
that line seems necessary. The same rule is followed 
of transferring each item from the Debit side of the 
Journal to the Debit side of the Ledger, and from 
the Credit side of the Journal to the Credit side of 
the Ledger. By carefully studying the Journal and 
Ledger Diagrams (96 and 98) you will see the 
method of daily posting better than can be described 
in words. 



CHAPTER VII. 

THE GROWING ACCOUNT. 



(70) A few remarks about the peculiarities of 
farm book-keeping might here be of interest. 

(71) The product of a farm groTvs, and the 
profits must be derived from the growth. A field of 
wheat or of tomatoes represents an investment, but 
has no practical, tangible value until the wheat or 
tomatoes are gathered and ready for sale. Even 
then it is often impossible to determine their exact 
value. If the crop is sold at once the value is defi- 
nitely fixed, but if the wheat is held for future sale 
we only know what we expect to get for it. Allow- 
mg for this uncertainty, which is not of great moment, 
the keepmg of farm books can be made as accurate 
as the keeping of books for any other business. One 
great point of difference, however, is that in lines 
where goods are manufactured, or merely dealt in. 
It IS comparatively easy to get at the cost of the 
product. This results in such concerns showing their 
profit on the manufacture or sale, when the goods 
are actually disposed of. 

To figure the cost of a growing field would be 
neither feasible or necessary, and in view of this it 



17 



1 8 The Growing Account. 

is found best in keeping farm books to figure the profit 
at the time of gathering the produce, whether it be 
sold at once or stored. There can be Httle objection 
to this method as the product of a farm is usually 
sold soon after it is gathered. 

(72) Without going further into the differences 
between keeping books for the farm and for mercan- 
tile establishments, there are a few more simple points 
to bear in mind. Products, whether they be grain, 
fruits, vegetables or live stock, can be disposed of 
in four different ways: 

(a) Sold for cash. 

(b) Sold on credit. 

(c) Held for future sale. 

(d) Lost through any cause. 

Rules for Keeping the Growing A/C. 

(73 — I) Enter in the Journal each day the 
amount and value of the crop or crops gathered that 
day. In the case of wheat and the like, the entry 
should be made when it is threshed. The entry 
should be made after this form: 

If sold for cash — 

Gathered 20 bu. potatoes and sold @ 1.50, 
for cash. 

CASH Dr. 30.00 

GROWING A/C Cr. 30.00 



The Growing Account. 19 

If sold on credit — 

Gathered 20 bu. potatoes and sold to James 
Smith on 30 days time, @ 1.50 

James Smith Dr. 30.00 

Growing A/C Or. 30.00 

If held for future sale — 

Gathered 20 bu. potatoes and put in barn, es- 
timated @ 1.50. 

PRODUCE Dr. 30.00 

Growing A/C Cr. 30.00 

Note. — Produce A/C represents the produce on 
hand; see paragraph (33) for a fuller description 
of this account. 

(74 — II) Enter in the Journal the description 
and value of any live stock sold or which has reached 
the point where it is ready for sale. If sold for cash 
or on credit the same form as in Rule I should be 
used. 

If held for future sale the entry should be in this 
form: 

3 calves now ready for sale, estimated @ $25 
each. 

Live Stock A/C Dr. 75.00 

Growing A/C Cr. 75.00 

Note. — Live Stock A/C represents the live stock 
on hand; see paragraph (54) for a fuller description 
of this account. 

(75 — III) Should a cow die, or some produce 
be destroyed after it had been credited in the Grow- 



20 The Growing Account. 

ING A/C, an entry should be made in the Journal 
after this form : 

I calf carried in Live Stock A/C died, valued 

@ $25. 

Growing A/C, Dr. 25.00 

Live Stock A/C Cr. 25.00 

Note. — As Cro-wing A/C is credited Tphen a 
profit is made it must be debited when a loss occurs. 

(76) If care and accuracy are used in keeping 
the Growing A/C it will show at any time just how 
much has been produced, and how the current month 
compares with previous years. For the purpose of 
simplifying the directions only one GROWING A/C 
has been given, but no doubt a number of farmers 
would prefer keeping the profits of their live stock 
separate from the produce; and even the produce 
items can easily be divided up into GROWING A/C 
— Wheat, Growing A/C — Corn, etc. When this 
is done the entries for wheat should be in the GROW- 
ING A/C — Wheat account, and the corn in the 
Growing A/C — Corn account. In the east and 
near the large cities many farmers will find it advis- 
able to separate their vegetables from the grain and 
grass crops in this way. 

(77) Crops grown and intended for the feed of 
stock on the farm should not be entered in the GROW- 
ING A/C. 



CHAPTER VIII. 



MONTHLY CLOSING. 



(78) At the end of every month is a good time 
to close the books. It is a very simple operation if 
the rules given here are carefully followed : 

(79 — I) Total the two sides of CasH A/C 
and the excess balance on the Debit side will show 
how much should be on hand. If this amount agrees 
with the cash actually on hand, Cash A/C is cor- 
rect. Should there be a difference, and you have less 
cash than is called for in Cash A/C, it would indi- 
cate some expenditure had been made without get- 
ting on the books. If the difference is considerable 
it should not be hard to locate the missing expendi- 
ture. In the event of your locating it enter in the 
Journal and post it. Should there still be a small 
difference, make an entry like this and post it : 

Shortage in cash not accounted for. 
Family Expense Dr. 1.28 

Cash Cr. 1.28 

Cash A/C and the cash actually on hand should 
now balance. 

(80 — II) Total the two sides of Bank A/C 
and the excess on the Debit side will show the amount 



22 Monthly Closing. 

on deposit. If this amount agrees with what is ac- 
tually in the bank. Bank A/C is correct. If not, 
look over the deposits and withdrawals and find 
where the error arises. An error in this account can 
only happen through making a wrong entry or post- 
ing, through not entering a deposit or withdrawal, or 
through not entering interest. When the error i£ 
any is located, correct it. Place any omitted or cor- 
recting entry in the Journal and post it. 

(81 — III) Look over the produce you have on 
hand and see if it about agrees with the value shown 
in the PRODUCE A/C. The excess balance on the 
Debit side of PRODUCE A/C should be of about 
the value of the produce held for future sale. If you 
find there is more, or less actually on hand than the 
books show, make an entry in the Journal after this 
manner : 

The value of the grain, etc., ready for sale 
is about $50 less than shown in the Produce 

A/C. 

Growing A/C Dr. 50.00 

Produce A/C Cr. 50.00 



or- 



The value of the grain, etc., ready for sale is 
about $50 greater than shown in Produce 
A/C. 

Produce A/C Dr. 50.00 

Growing A/C Cr. 50.00 



Monthly Closing. 23 

Note. — A discrepancy of this kind between the 
produce on hand and the value as shown in 
Produce A/C may occur in several ways — 

{h) Carlessness in keeping the Crowing A/C. 

(b) Loss through disease. 

(c) Feeding to farm stock, 

(d) Selling the produce charged to Produce A/C 
at greater or lesser prices than estimated. 

(82— IV) Now treat the LiVE Stock A/C in 
the same way. 

Note. — // will be found if the books are care- 
fully k^pi that adjustment entries of this kind need 
be made but very rarely. 

(83 — V) After the posting of all entries from 
the Journal to the Ledger, total the Debit and Credit 
columns of the Journal to see that they agree in 
amount. If they do not agree see where the differ- 
ence arises and correct it. Bear in mind that when- 
ever an amount is put in the Debit column of the 
Journal, an exactly equal amount must be put in 
the Credit column. Should you correct an error in 
the Journal which would change an amount posted 
to the Ledger, the correction should also be made in 
the Ledger. 

(84 — VI) Next take a sheet of paper ruled 
and headed as shown in the Trial BALANCE DIA- 
GRAM (99). Starting on the top line of this sheet 



24 Monthly Closing. 

next below the heading, write the page number and 
the name of the first account in the Ledger. On 
the same line put the total of the Debits, if any, in 
the Debit column, and the total of the Credits, if 
any, in the Credit column. Continue this with all 
accounts in the Ledger. 

Note. — Put the totals in pencil figures, just un- 
der the last amount in the Ledger accounts, see 
Ledger Diagram (98). 

(85 — VII) Add the Debit and Credit sides of 
the Trial Balance sheet separately, and if they total 
the same the Trial Balance is correct. Should the 
totals not be the same, some mistake or mistakes have 
been made. To discover such errors it is best to 
look systematically as follows: — 

(a) Check the totals of the Trial Balance sheet. 

{b) Go over each Ledger account and see if 
both sides have been totalled correctly, and the right 
amount carried to the Trial Balance sheet. 

(c) Check over all postings for the month. If 
the last previous balance was correct and the totals 
of the two sides of the Journal give the same 
amount, any errors must be discovered by this check- 
ing. At first you may find it necessary to check more 
than once. 

(86 — VIII) After the Trial Balance has been 
found correct, turn to HouSE EXPENSE A/C in the 
Ledger and as shown in the LEDGER DIAGRAM 



Monthly Closing. 25 

(98), make an entry in red ink on the Credit side 
after this form : 

Oct. 31. Loss and Gain. 75 24.52 

The amount will be the difference between the totals 
of the two sides of the account. Then put down the 
total of each side, which will be the same, and rule 
as shown in the diagram. 

(87 — IX) Turn to Loss AND Gain A/C on 
page 75, and after this form make an entry in red 
ink on the Debit side, see diagram (98), 

Oct. 31. House Expense 14 24.52 

(88 — X) Treat FarM EXPENSE A/C. 

Family Expense A/C. 
Growing A/C. 

Interest and Dividends A/C. 
Taxes and Insurance A/C. 
Butter and Eggs A/C. 

and any other accounts showing losses or gains in 
the same manner, excepting as noted in Rule XI. 
Make all transfer entries in red ink. 

(89 — XI) When an account shows a loss the 
total of the Debit side will be the greater ; the trans- 
fer entry will therefore be on the Credit side of the 
account, and on the Debit side of Loss AND GaiN 
A/C. When an account shows a gain, the total of 
the Credit side will be the greater; the transfer en- 



26 Monthly Closing. 

try will then be on the Debit side of the account, 
and on the Credit side of Loss AND Gain A/C. 

(90 — XII) The profits will always show on 
the Credit side of Loss AND Gain A/C, and the 
losses on the Debit side. 

(91^ — XIII) The accounts enumerated in 
Rules VIII, and X, are the only ones in the speci- 
men set of books which should be transferred to 
Loss AND Gain A/C. It is not probable you will 
find it necessary to open any other accounts of this 
nature, but if so they should be transferred and ruled 
off each month. Selecting accounts which show a 
loss or a gain may seem a trifle difficult at first, but 
it is very simple. You will note that such accounts 
are ones like HouSE EXPENSE, Taxes, GROWING 
A/C, etc., but are not accounts like Bank, Cash, 
or James Trevor, which only show what is owned 
or owed. We neither lose nor gain when we lend 
money to John Smith, it is merely a transfer of cash 
from our pocket or bank to John Smith, and we ex- 
pect to get it back. When we buy a plow we do not 
lose anything, for we have merely exchanged cash 
for something of equal value, and which we still 
have. When we pay out wages, however, it is a 
loss, for we have nothing tangible left in place of the 
cash paid out. 

(92 — XIV) After all the accounts mentioned 
are transferred to Loss AND Gain A/C, total the 



Monthly Closing. 27 

two sides of that account, and on the side havin'g the 
smaller total make an entry in red ink as shown in 
the diagram of Loss AND Gain A/C (98) : 
Oct. 31. Owner's Capital A/C i 132.72 
Total and rule this account as shown. 

(93 — XV) Should the transfer entry be on the 
Debit side, make a corresponding entry in red ink on 
the Credit side of OwNER*S CAPITAL A/C as 
shown in the diagram (98) : 

Oct 31. Loss and Gain A/C 75 132.72 
The amount will be the profit for the month. Should 
the transfer entry be on the Credit side of Loss AND 
Gain A/C, make the corresponding entry on the 
Debit side of Owner's Capital A/C. The 
amount will then be the loss for the month. 

(94) Whenever an amount is placed on one 
side of the Journal or Ledger, an equal amount 
must be placed on the other side. This is the great 
Cardinal Rule of double entry book-keeping, and 
there are no exceptions to it. 



28 



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Butter and Eggs 
Interest and Divide 
Taxes and Insuran( 
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CHAPTER X. 



AFTER THE FIRST MONTH. 



(100) The instructions and method given in 
the preceding chapters and diagrams are planned so 
that every month is separate and complete in itself. 
Yet, while each month is complete, and the books 
are closed every month, no opening entries of any 
kind are necessary in beginning the next month. 

(101) In starting the next month, write in the 
Journal on the top of the next open page : 

Journal, November i, 1907. 

and then continue to record the daily transactions as 
heretofore. 

(102) Post from the Journal to the Ledger 
as during the first month. For convenience start the 
entries on both sides on the same line of the Ledger, 
as shown in the diagram of Cash A/C (98). 

(103) In taking off the Trial Balance at the 
end of the second and succeeding months, take only 
the figures below the ruled lines. This refers espe- 
cially to accounts like HoUSE EXPENSE, which 
have been closed into Loss AND Gain A/C. Total 
the figures below the ruled lines, in pencil as before. 



49 



50 After the First Month. 

On the accounts not ruled off, add the current 
month's entries to the penciled total under the pre- 
ceding month, and pencil in the combined total as 
before. These penciled totals are then carried to the 
Trial Balance. 

( 1 04) After the Trial Balance has been proved 
correct, transfer the loss and gain balances to Loss 
AND Gain A/C as before, closing and ruling the 
accounts transferred. Then finish up by closing the 
Loss AND Gain A/C into the Owner's Capi- 
tal A/C. 

(105) Every month is complete in itself and 
the work continues in the same manner from month 
to month. This constant repetition will soon famil- 
iarize you with all the details of book-keeping, and 
those points which at first may seem obscure or un- 
necessary will be readily understood. 



CHAPTER XI. 



DEFINITIONS AND MEANINGS. 



These definitions are only intended to cover the 
meanings of the words or expressions, as they are 
used in book-keeping, and more particularly in this 
book. 

(106) Account, Ledger. — The Ledger is 
divided into sections, each section being called an 
account. In each account are grouped all items re- 
lating to that account. Thus, all cash matters are 
kept in Cash A/C, and all relating to implements 
in Implements A/C. 

(107) Adjustment Entries. — Entries 
made in the Journal to correct some previous error 
or omission. 

(108) Animals, Growth of. — For book- 
keeping purposes an animal is considered grown, 
when it has become ready for work or for sale. Be- 
fore then it is a source of expense rather than of 
profit. 

(109) Balance. — An account is said to 
balance when the totals of both sides are the same. 



52 Definitions and Meanings. 

A "Debit Balance," means there is an excess 
amount on the Debit side, and vice versa. 

(110) Balance, Trial. — See Trial Bal- 
ance. 

(111) Bank Account. — In book-keeping 
is meant the LEDGER A/C of that name. It also 
indicates the account kept at one*s bank. 

(112) Bank Balance. — The amount of 
the bank balance is shown by the excess on the 
Debit side of Bank A/C. This should exactly 
tally with the amount actually on deposit. 

(113) Black Ink. — See Ink. 

(114) Book-keeping. — See Double Entry. 

(113) Borrowing. — When a thing is bor- 
rowed. Debit that which is received, and Credit the 
lending party. 

(116) Butter and Eggs. — See (55). 

(117) Capital A/C. — Represents the in- 
vestment; the excess of what is owned over what is 
owed is the capital of the farm. See (46). 

(118) Cash. — The money actually on hand. 

(119) Cash Balance. — The amount of 
cash on hand, which should agree with the excess 
balance on the Debit side of Cash A/C. 



Definitions and Meanings. 53 

(120) Check. — Used to show an entry has 
been posted from the Journal to the Ledger. 

(121) Cheque or Check. — A written 
order on a bank to pay money on demand. 

(122) Closed. — An account is said to be 
closed when it balances. See CLOSING THE 
Books. 

(123) Closing the Books. — An expression 
used to describe the terminating of the month's bus- 
iness, preparatory to opening the books for the next 
month. 

(124) Credit. — We credit that which gives, 
produces, or pays. 

(123) Credit, Buying on — Means when 
we have things charged to our account. 

(126) Credit, Selling on — Means when 
we trust a party to pay later. 

(127) Credit 5ide. — The right hand side of 
the Journal or Ledger. 

(128) Daily Transactions. — Those ex- 
penditures, etc., which are recorded in the Journal 
from day to day. 

(129) Debit. — We debit that which costs, re- 
ceives, or which we pay. 



54 Definitions and Meanings. 

(130) Debit Side. — The left hand side of 
the Journal or Ledger. 

(131) Deposit. — Money entrusted to a 
bank. 

(132) Deterioration. — Shrinkage in value 
of buildings, animals, crops, implements or invest- 
ments. 

(133) Dividends. — Income from stocks, and 
from some other forms of investments. 

(134) Double Entry. — Book-keeping is 
called double entry when every transaction is re- 
corded by entering equal amounts on the Debit and 
Credit sides of the Journal, and when at all times 
and through every process the total amounts are the 
same on the Debit and Credit sides of the books. 

(135) Entry. — The record, or transfer of 
the record, of a transaction. 

(136) Excess .Balance. — The excels 
amount of one side of a Ledger account over the 
other side. 

(137) Expenditure. — What is paid out. 

(138) Expense. — Those expenditures for 
other than debts, which after being paid leave noth- 
ing of inventoriable value. 



Definitions and Meanings. 55 

(139) Family Expense. — All expenditures 
personal to the family, like clothes and amusements. 

(140) Farm Buildings. — All buildings on 
the farm, including the dwelling house. 

(141) Farm Expense. — All expense relat- 
ing to the operation or repair of the farm, excepting 
those expenditures for articles of inventoriable value, 
like implements. 

(142) Farm Property. — All real estate, 
buildings and fixtures, but not the movables nor 
chattels. 

(143) Feed for Stock. — Feed grown and 
intended to be used for the farm stock. This feed 
should neither be inventoried, entered in the GROW- 
ING A/C, nor be carried in the PRODUCE A/C. 

(144) Future Sale. — A sale not consum- 
mated, nor necessarily arranged, but expected. 

(145) Gain. — The excess balance on the 
Credit side of Loss AND Gain A/C. 

(146) Growing A/C— See Chapter VII. 

(147) Harvesting. — Gathering the crops. 

(148) Heading. — The title or other descrip- 
tion placed above the body of the wrtiten matter. 

(149) House Expense. — All expenditures 
for the table, and of a general nature like heat and 
light. 



56 Definitions and Meanings. 

(150) Implements. — All kinds of tools and 
machinery. 

(151) Index. — Used to locate the Ledger 
accounts. 

(152) Ink. — Red ink is used for making 
transfer entries in the Ledger and for ruling. Black 
ink is used for all other purposes. 

(153) Insurance Premiums. — The fee 
paid for insurance. 

(154) Interest. — The premium for the use 
of money. 

(155) Inventory. — A tabulated list of Re- 
sources and Liabilities. 

(156) Investment. — That into which is 
placed surplus capital or savings, either for greater 
security or greater profit. All loans, and expendi- 
tures for articles of inventoriable value are generally 
speaking, investments. 

(157) JP.— Journal Page. 

(158) Journal. — The book of original 
entry. 

(159) LP.— Ledger Page. 

(160) Ledger. — A book divided into ac- 
counts, and to which is posted all entries from the 
Journal. 



Definitions and Meanings. 57 

(161) Ledger Accounts. — See Accounts. 

(162) Ledger Index. — See Index. 

(163) Liabilities. — That which is owed. 

(164) Live Stock. — All animals on the 
farm, intended either for work or sale. 

(165) Loan. — That which is borrowed or 
lent. 

(166) Loss. — The excess balance on the 
Debit side of Loss AND GaIN A/C. 

(167) Loss AND Gain. — The account to 
which is transferred all losses and gains shown in 
the other accounts. An excess balance on the Debit 
side shows a loss, and on the Credit side a profit. 

(168) Monthly .Closing. — See Closing 
the Books. 

(169) Mortgage Payable. — A mortgage 
on property, which we must pay. 

(170) Net Worth. — The excess of Re- 
sources over Liabilities. 

(171) Notes Payable and Receivable. 
— A Note given, or a Note received by us. 

( 1 72 ) Owe. — Liabilities. 
( 1 73 ) — Own. — Resources. 



58 Definitions and Meanings. 

(174) Owner's Capital A/C. — See Capi- 
tal A/C. 

(175) Pencil. — In book-keeping the pencil 
is only used for making temporary totals and mem- 
oranda, and for adding up the Ledger accounts at 
the end of the month. 

( 1 76) Personal Effects. — Articles like 
clothes and jewelry. 

(177) Posting. — The transferring of entries 
from the Journal to the Ledger. 

(178) Produce. — The product of the farm, 
see (53). 

(179) Profit.— See Gain. 

(180) Receipts. — Gross income. 

(181) Red Ink.— See Ink. 

(182) Resources. — That which is owned. 

(183) Ruling. — Lines used to separate one 
set of figures from another set; and to show the end 
of a transaction or the closing of an account. 

(184) Stock, Live — See Live Stock. 

(185) — Sundries.' A word used in book- 
keeping to indicate a combination of several ac- 
counts. 

(186) Total. — The whole sum. 



Definitions and Meanings. 59 

(187) Transfer Entry. — An entry -made 
in red ink, transferring an amount from one Ledger 
account to another. 

(188) Trial Balance.— A balance taken 
just before closing the books to make sure the totals 
of the Debit and Credit sides of the Ledger are 
the same. 



INDEX. 



Paragraph 

Accounts, definition of 1 06 

dividing some 76 

indexing 34 

Ledger, explanation of 43 to 63 

locating 1 3 

opening new 16, 33, 41 

other than principal 32 

personal 63 

principal 1 6 to 32 

showing a loss or gain 88, 89, 91 

Adjustment entries, definition of 107 

After the first month 1 00 to 1 03 

A^musements 31 

Animals, growth of 1 08 

Balance, definition of 1 09 

Balance-Trial, see Trial Balance. 

Bank A/C, explanation of 48, 1 1 1 

openmg of 19 

Bank accounts, if more than one 2 

Bank Balance, adjusting 80 

definition of 112 

errors in 80 

Book-keeping, double entry 114 

60 



Index. 61 

Paragraph 

Book-keeping, peculiarities of 70 

Borrowing, definition of 115 

Butter and Eggs A/C, explanation of 55 

opening or Zo 

Calves 74 

Capital A/C, see Owner's Capital A/C. 

Cash Balance, definition of 119 

Cash, definition of 118 

over and short 79 

selling for 72, 73, 74 

Cash A/C, balancing 79 

errors in /V 

explanation of ". . . . .47 

opening of 18 

Check, (V) use of 39, 40, 120 

Cheque or Check, definit'on of 121 

Church 51 

Closed, definition of 1 22 

Closing — Monthly 78 to 94 

Closing the Books, meaning of 1 23 

in later months 1 04 

rules for 78 to 94 

Clothes 51 

Contents V 

Corn 76 

Cost 71 

Credit, buying on 67, 125 



62 Index. 

Paragraph 

Credit, definition of 1 24 

'* selling on 12. 13.1 A 

Credit column .11 

Credit side 127 

Crops gathered 73 

Daily Transactions, after first month 101 

definition of 128 

diagram of 96 

entering and posting. .64 to 69 

Debit, definition of 1 29 

Debit column 10 

" side 130 

Definitions 1 06 to 1 88 

Deposit, definition of 131 

Deterioration, meaning of 132 

Diagrams 95 to 99 

for illustration only 37 

Dividend A/C, see Interest and Dividend A/C. 

Dividends, definition of 1 33 

Double Entry book-keeping 134 

Eggs, see Butter and Eggs A/C 

Entries, opening 9 to 13 

in Journal 65, 66, 67, 73 

Entry, definition of 1 35 

Excess Balance, meaning of 136 

Expenditure, meaning of 137 



Index. 63 

Paragraph 

Expense, meaning of 1 38 

Expenses, transfer of 59 

of family 51 

of farm 49 

of house 50 

Explanation of Ledger Accounts 45 to 63 

Family expense, definition of 139 

Family Expense A/C, explanation of 51 

openmg or LL 

Farm Buildings, definition of 1 40 

Farm expense, definition of 141 

F arm Expense A/C, explanation of 49 

opening of 20 

Farm Property, definition of 1 42 

Farm Property A/C, explanation of 58 

opening of 29 

Feed for stock 1 43 

Fertilizer 49 

Figuring profit 71 

Food 50,67 

Foreword of Instruction VII 

Fruit 72 

Fuel 50 

Furniture „ 2, 50 

Future Sale, definition of 1 44 

Gain, see Loss and Gain A/C 

definition of 1 45 



64 Index. 

Paragraph 

Gain, for month 39 

Gains, transfer of 59 

Grain 53, 72, 76 

Grass 76 

Grinding 49 

Growing A/C, explanation of 52, 70 to 77 

opening or Zj 

rules for 73 to 77 

Growth of animals 1 08 

Harvesting, definition of 147 

of produce 52 

Hat 67 

Heading, meaning of 1 48 

House expense, definition of 1 49 

House Expense A/C, explanation of 50 

opening or Z I 

Implements, definition of 1 50 

Implements A/C, explanation of 60 

opening of 30 

Index Diagram 97 

" for Ledger 15,34,38, 151 

Indexing accounts 34 

Ink, uses of 1 52 

Instruction, Foreword of VII 

Insurance Premiums, definition of 153 

Insurance and Taxes A/C, explanation of. . . .57 



Index. 65 

Paragraph 

Insurance and Taxes Taxes A/C, opening of . . .28 

Interest, definition of 1 54 

entering bank 80 

Interest and Dividends A/C, explanation of . . . .56 

opening or Li 

Introduction Ill 

Inventory I to 8 

defintion of 155 

diagram 95 

Investment, definition of 1 56 

Journal, definition of 1 58 

Diagram 96 

entries 65, 66, 67 

opening the 9 to 13 

" rules for the 13, 43, 83, 94 

Labor 49 

Ledger, definition of 1 60 

Diagram 98 

opening the 1 4 to 34 

" rules for the 43, 44, 89, 94 

Ledger Accounts, explanation of. . . .45 to 63, 106 

opening new 1 4 to 34, 4 1 

Ledger Index Diagram 97 

Liabilities 1 to 8 

definition of 1 63 

Diagram 95 

Light 50 



66 



Index. 



Paragraph: 

Live Stock, definition of ] 64 

feed for 77,81, 143 

loss of 75 

not sold at once 54 

on hand 54, 74 

value of 54 

when sold 54 

Live Stock A/C, adjusting of 82 

explanation of 54, 74 

opening of 25 

Loan, definiton of 1 65 

Loss, definition of 1 66 

for month 59 

Losses and Gains, transfer of 59 

Loss and Gain A/C, explanation of 59, 1 67 

opening or d\ 

rules for the 86 to 94 

Machinery 60 

Meanings 1 06 to 1 88 

Monthly Closing 78 to 94 

in later months 1 04 

Mortgage Payable, definition of 1 69 

Mortgage Payable A/C, explanation of 62 

opening of 41 

Mortgages Receivable 62 



Net Worth 7, 12, 46, 170 

Newspapers 51 



Index. 67 

Paragraph 

Notes Payable, definition of 1 71 

Notes Payable A/C, explanation of 62 

****** ' C A ^ 

opening or 41 

Opening the Journal 9 to 13 

" Ledger 14 to 34 

Owe, what you 1 to 8, 1 72 

Own, what you 1 to 8, 1 73 

Owner's Capital A/C, explanation of 46 

opening or I / 

transfers to 59 

Pencil, use of 1 75 

Personal Accounts, explanation of 63 

Personal effects 2, 1 76 

expenditures 51 

Costing 35 to 44, 59, 68, 69 

after first month 1 02 

daily transactions 69 

definition of 177 

rules for 43, 68, 69, 83 

time for 68 

Potatoes 73 

Produce, definition of 1 78 

gathering of 52, 53, 73 

lost or destroyed 75 

on hand 81 

stored 53, 73 

value of 53, 73, 81 



66 Index. 

Paragraph 

Produce, when sold 53, 73 

when not sold at once 53, 73 

Produce A/C, adjusting of 81 

discrepancies in 81 

explanation of 53 

opening of 24 

Profits of the farm 71 

for month -59 

Property, bought, deteriorated, sold 58 

Property A/C, see Farm Property A/C. 

Receipts, definition of 180 

Red mk, uses of 88, 1 52 

Repairs 49 

Resources 1 to 8 

definition of 1 82 

Diagram 95 

Rules, Cardmal VIII, 94 

for closing books 79 to 94 

for Growing A/C 73 to 77 

for the Journal 1 3, 43, 83, 94 

for the Ledger. . . . : 43, 44, 89, 94 

for Loss and Gain A/C 86 to 94 

for Personal Accounts 63 

for posting 43, 68, 69, 83 

Ruling, use of 1 83 

Selling for cash 72, 73, 74 

" on credit 72, 73, 74 



Index. 69 

Paragraph 

Stock, see Live Stock. 

Stocks and Bonds A/C, explanation of 61 

opening or 41 

Sundries, meaning of 39, 183 

Taxes and Insurance A/C, explanation of 57 

opening or Zo 

Telephone 50 

Tomatoes 71 

Tools 60 

Total, definition of 1 86 

Transactions, see Daily Transactions. 

Transfer entries 59, 1 87 

Trial Balance, definition of 1 88 

Diagram 99 

finding errors in 85 

for later months 1 03 

instructions for taking 84, 85 

Trust, buying on 67, 125 

Value of product 71 

Vegetables 53, 72, 76 

Wheat 71, 73, 76 



SEP 36 1908 



